
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC7426]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                Subtitle F--Procedure and Administration
 
                    CHAPTER 76--JUDICIAL PROCEEDINGS
 
        Subchapter B--Proceedings by Taxpayers and Third Parties
 
Sec. 7426. Civil actions by persons other than taxpayers


(a) Actions permitted

                          (1) Wrongful levy

        If a levy has been made on property or property has been sold 
    pursuant to a levy, and any person (other than the person against 
    whom is assessed the tax out of which such levy arose) who claims an 
    interest in or lien on such property and that such property was 
    wrongfully levied upon may bring a civil action against the United 
    States in a district court of the United States. Such action may be 
    brought without regard to whether such property has been surrendered 
    to or sold by the Secretary.

                         (2) Surplus proceed

        If property has been sold pursuant to a levy, any person (other 
    than the person against whom is assessed the tax out of which such 
    levy arose) who claims an interest in or lien on such property 
    junior to that of the United States and to be legally entitled to 
    the surplus proceeds of such sale may bring a civil action against 
    the United States in a district court of the United States.

                    (3) Substituted sale proceeds

        If property has been sold pursuant to an agreement described in 
    section 6325(b)(3) (relating to substitution of proceeds of sale), 
    any person who claims to be legally entitled to all or any part of 
    the amount held as a fund pursuant to such agreement may bring a 
    civil action against the United States in a district court of the 
    United States.

                      (4) Substitution of value

        If a certificate of discharge is issued to any person under 
    section 6325(b)(4) with respect to any property, such person may, 
    within 120 days after the day on which such certificate is issued, 
    bring a civil action against the United States in a district court 
    of the United States for a determination of whether the value of the 
    interest of the United States (if any) in such property is less than 
    the value determined by the Secretary. No other action may be 
    brought by such person for such a determination.

(b) Adjudication

    The district court shall have jurisdiction to grant only such of the 
following forms of relief as may be appropriate in the circumstances:

                           (1) Injunction

        If a levy or sale would irreparably injure rights in property 
    which the court determines to be superior to rights of the United 
    States in such property, the court may grant an injunction to 
    prohibit the enforcement of such levy or to prohibit such sale.

                      (2) Recovery of property

        If the court determines that such property has been wrongfully 
    levied upon, the court may--
            (A) order the return of specific property if the United 
        States is in possession of such property;
            (B) grant a judgment for the amount of money levied upon; or
            (C) if such property was sold, grant a judgment for an 
        amount not exceeding the greater of--
                (i) the amount received by the United States from the 
            sale of such property, or
                (ii) the fair market value of such property immediately 
            before the levy.

    For the purposes of subparagraph (C), if the property was declared 
    purchased by the United States at a sale pursuant to section 6335(e) 
    (relating to manner and conditions of sale), the United States shall 
    be treated as having received an amount equal to the minimum price 
    determined pursuant to such section or (if larger) the amount 
    received by the United States from the resale of such property.

                        (3) Surplus proceeds

        If the court determines that the interest or lien of any party 
    to an action under this section was transferred to the proceeds of a 
    sale of such property, the court may grant a judgment in an amount 
    equal to all or any part of the amount of the surplus proceeds of 
    such sale.

                    (4) Substituted sale proceeds

        If the court determines that a party has an interest in or lien 
    on the amount held as a fund pursuant to an agreement described in 
    section 6325(b)(3) (relating to substitution of proceeds of sale), 
    the court may grant a judgment in an amount equal to all or any part 
    of the amount of such fund.

                      (5) Substitution of value

        If the court determines that the Secretary's determination of 
    the value of the interest of the United States in the property for 
    purposes of section 6325(b)(4) exceeds the actual value of such 
    interest, the court shall grant a judgment ordering a refund of the 
    amount deposited, and a release of the bond, to the extent that the 
    aggregate of the amounts thereof exceeds such value determined by 
    the court.

(c) Validity of assessment

    For purposes of an adjudication under this section, the assessment 
of tax upon which the interest or lien of the United States is based 
shall be conclusively presumed to be valid.

(d) Limitation on rights of action

    No action may be maintained against any officer or employee of the 
United States (or former officer or employee) or his personal 
representative with respect to any acts for which an action could be 
maintained under this section.

(e) Substitution of United States as party

    If an action, which could be brought against the United States under 
this section, is improperly brought against any officer or employee of 
the United States (or former officer or employee) or his personal 
representative, the court shall order, upon such terms as are just, that 
the pleadings be amended to substitute the United States as a party for 
such officer or employee as of the time such action was commenced upon 
proper service of process on the United States.

(f) Provision inapplicable

    The provisions of section 7422(a) (relating to prohibition of suit 
prior to filing claim for refund) shall not apply to actions under this 
section.

(g) Interest

    Interest shall be allowed at the overpayment rate established under 
section 6621--
        (1) In the case of a judgment pursuant to subsection (b)(2)(B), 
    from the date the Secretary receives the money wrongfully levied 
    upon to the date of payment of such judgment;
        (2) in the case of a judgment pursuant to subsection (b)(2)(C), 
    from the date of the sale of the property wrongfully levied upon to 
    the date of payment of such judgment; and
        (3) in the case of a judgment pursuant to subsection (b)(5) 
    which orders a refund of any amount, from the date the Secretary 
    received such amount to the date of payment of such judgment.

(h) Recovery of damages permitted in certain cases

                           (1) In general

        Notwithstanding subsection (b), if, in any action brought under 
    this section, there is a finding that any officer or employee of the 
    Internal Revenue Service recklessly or intentionally, or by reason 
    of negligence, disregarded any provision of this title the defendant 
    shall be liable to the plaintiff in an amount equal to the lesser of 
    $1,000,000 ($100,000 in the case of negligence) or the sum of--
            (A) actual, direct economic damages sustained by the 
        plaintiff as a proximate result of the reckless or intentional 
        or negligent disregard of any provision of this title by the 
        officer or employee (reduced by any amount of such damages 
        awarded under subsection (b)); and
            (B) the costs of the action.

     (2) Requirement that administrative remedies be exhausted; 
                             mitigation; period

        The rules of section 7433(d) shall apply for purposes of this 
    subsection.

                        (3) Payment authority

        Claims pursuant to this section shall be payable out of funds 
    appropriated under section 1304 of title 31, United States Code.

(i) Cross reference

            For period of limitation, see section 6532(c).

(Added Pub. L. 89-719, title I, Sec. 110(a), Nov. 2, 1966, 80 Stat. 
1142; amended Pub. L. 93-625, Sec. 7(a)(2)(E), Jan. 3, 1975, 88 Stat. 
2115; Pub. L. 94-455, title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 
Stat. 1834; Pub. L. 97-248, title III, Sec. 350(a), Sept. 3, 1982, 96 
Stat. 639; Pub. L. 99-514, title XV, Sec. 1511(c)(16), Oct. 22, 1986, 
100 Stat. 2745; Pub. L. 105-206, title III, Secs. 3102(b), 3106(b)(1), 
(2), July 22, 1998, 112 Stat. 730, 733.)


                               Amendments

    1998--Subsec. (a)(4). Pub. L. 105-206, Sec. 3106(b)(1), added par. 
(4).
    Subsec. (b)(5). Pub. L. 105-206, Sec. 3106(b)(2)(A), added par. (5).
    Subsec. (g)(3). Pub. L. 105-206, Sec. 3106(b)(2)(B), added par. (3).
    Subsecs. (h), (i). Pub. L. 105-206, Sec. 3102(b), added subsec. (h) 
and redesignated former subsec. (h) as (i).
    1986--Subsec. (g). Pub. L. 99-514 substituted ``the overpayment rate 
established under section 6621'' for ``an annual rate established under 
section 6621''.
    1982--Subsec. (b)(2)(C). Pub. L. 97-248 inserted ``if such property 
was sold,'' before ``grant a judgment'' and ``the greater of--'' after 
``not exceeding'', redesignated remaining provisions as cl. (i), and 
added cl. (ii).
    1976--Pub. L. 94-455 struck out ``or his delegate'' after 
``Secretary'' wherever appearing.
    1975--Subsec. (g). Pub. L. 93-625 substituted ``an annual rate 
established under section 6621'' for ``the rate of 6 percent per 
annum''.


                    Effective Date of 1998 Amendment

    Pub. L. 105-206, title III, Sec. 3102(d), July 22, 1998, 112 Stat. 
731, provided that: ``The amendments made by this section [amending this 
section and section 7433 of this title] shall apply to actions of 
officers or employees of the Internal Revenue Service after the date of 
the enactment of this Act [July 22, 1998].''
    Amendment by section 3106(b)(1), (2) of Pub. L. 105-206 effective 
July 22, 1998, see section 3106(c) of Pub. L. 105-206, set out as a note 
under section 6325 of this title.


                    Effective Date of 1986 Amendment

    Amendment by Pub. L. 99-514 applicable for purposes of determining 
interest for periods after Dec. 31, 1986, see section 1511(d) of Pub. L. 
99-514, set out as a note under section 47 of this title.


                    Effective Date of 1982 Amendment

    Section 350(b) of Pub. L. 97-248 provided that: ``The amendment made 
by subsection (a) [amending this section] shall apply with respect to 
levies made after December 31, 1982.''


                    Effective Date of 1975 Amendment

    Amendment by Pub. L. 93-625 effective July 1, 1975, and applicable 
to amounts outstanding on such date or arising thereafter, see section 
7(e) of Pub. L. 93-625, set out as an Effective Date note under section 
6621 of this title.


                             Effective Date

    Section applicable after Nov. 2, 1966, regardless of when title or 
lien of United States arose or when lien or interest of another person 
was acquired, except in a case in which a lien or title derived from 
enforcement of a lien held by United States has been enforced by a civil 
action or suit which has become final by judgment, sale, or agreement 
before Nov. 2, 1966, or in a case in which section would impair a 
priority held by any person other than United States holding a lien or 
interest prior to Nov. 2, 1966, operate to increase liability of such 
person, or shorten time of bringing suit with respect to transactions 
occurring before Nov. 2, 1966, see section 114(a)-(c) of Pub. L. 89-719, 
set out as Effective Date of 1966 Amendments note under section 6323 of 
this title.

                  Section Referred to in Other Sections

    This section is referred to in sections 6325, 6503, 6532, 7421 of 
this title; title 28 sections 1346, 2409a.
